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Team Digby Business Report

Prepared for
Lisa Hempfling
Vincennes University Professor
Integrated Business Project
MGMT - 293

Prepared by

April 19, 2017


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Table of Contents

Introduction ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Page 3

Round 1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Page 4

Round 2 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Page 7

Round 3 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Page 11

Round 4 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Page 16

Round 5 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Page 22

Round 6 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Page 28

Round 7 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Page 34

Round 8 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Page 41

Closing Remarks ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Page 47


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Craig Sander, Tia Edwards


Tim Yoder, Ryan Dilger
MGMT 293
Capsim Final Report
Thursday 9:00 A.M

Team Digby Business Report

Introduction
We all started Capsim not really knowing what to expect from the class what so ever. Little did

we know that we would end up creating, and successfully running a multimillion-dollar

company. The company created two successful products named Daze and Donkey. With the

product Daze, we allowed the product to stay in both the markets of high and low-tech. This

benefited the company by allowing it to play both markets however; it was dominant in the low-

tech market segment. The product Donkey was strictly an inexpensive low-tech product for

gaining market share. The overall strategy was to remain in the low-tech segment to achieve

greater market potential by selling a larger quantity of products. We achieved this long-term goal

by setting round goals to help build the company. For example, in contribution margin we

always set out to get 30% or higher. Another goal was not to need an emergency loan, and we

managed to accomplish this goal for seven rounds. We happened to have one slip up in round

three, gaining an emergency loan of roughly three million dollars. We also received stars for our

inventory for all but three rounds, satisfying 95% of our customers. This report will continue to

go into detail of all eight rounds and discuss other decisions we made throughout the course.
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Team Digby Capsim Round 1


R&D

In research and development for round one, we already had one product predetermined for our

business. The first product, Daze started with a performance of 6.4, a size of 13.6, and a MTBF

of 2,100. We made some slight changes to Daze in order to have a product that could compete

effectively in both marketplaces; we improved the performance to 6.7, decreased the size to 13.0,

and decreased the MTBF to 19,000. Daze is a leading edge low-tech product that is also a middle

of the line high-tech product that fits into the fine cut of both low and high-tech markets. Next,

we began R&D on a brand-new product called Donkey with a performance of 4.8, a size of 15.2,

and a MTBF of 15,000. Donkey is a low-tech product that is within the low-tech fine cut but

outside the high-tech fine cut. Based on the round one outcomes I believe that we made the right

decisions for R&D.

Marketing

In the marketing of Daze, we set the price at $33.50 hoping to have the cheapest low-tech

product to win the most market share. Next, we set the promo budget and sales budget at $2,250

to raise our awareness and accessibility. At the beginning of the round, our awareness was at

55% and our accessibility was at 40%, and at the end of the round the awareness is 84% and the

accessibility is 52%. For round one we set our forecast at 1,400 to be conservative. I believe that

we priced our item correctly because we stocked out but I think if we would have forecasted

more we would have still sold all our items and gained a larger market share because in low-tech

the customers have a 41% buying criteria based on cost. I feel like our sales budget and promo

budget were also set correctly because we could not have spent that much more money for the

round. I do not think we forecasted appropriately but neither did anyone in the round because
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everyone stocked out which meant anyone who would have had more product available would

have sold it no matter what because it would have been the only product available.

Production

In production, we set a production schedule of 1,350, which was less than our forecast, but we

had 87 products on hand and we also added a few because of the production after adjustment

number. We bought capacity for Daze but only 100 simply to be able to make 200 more the next

round. We also bought 469 capacity of Donkey so we would be able to make over 900 of it the

next round. We did not purchase any automation this round because we wanted to spend more of

our money on capacity so we could have more product out the next round to capture more

market shares. We did not change the A/P lag days. Our max investment was $6,490 and we

spent exactly that on buying capacity only. I think that we made good decisions in production the

only thing I might have changed would have been the production schedule to make more

product.

Finance

In the finance section, we issued $3,000 worth of stock and gave out dividends of $0.20 per

share. The current price per share of our stock is $11.17, and we did not retire any stock. To

finance improvements, we borrowed $2,000 in current debt and only $1,000 in long-term debt.

We changed the A/R lag days to 40 in the first round to help sell products and gain market share.

Our cash position at the start of the round was $5,602 and at the end of the round, it is projected

at $5,858. The only changes I would have made in this section would have been to issue more

long-term debt for the future rounds to have some cash for improvements.
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Conclusion

I felt good about this round based on our decisions but the outcome was not as good as I had

anticipated. Our team got three stars out of five we got the stars in profit, emergency loan, and

inventory. The stars we did not get were in margin, and stock price. As far as future decisions go

I do not think that we are very far off from competing with the other companies, we just need to

fine tune a few of our numbers.


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Team Digby Capsim Round 2


R&D

In round, two we made more slight changes to Daze increasing its performance from 6.7 to 7.1

and decreased the size from 13.0 to 12.4, and we left the MTBF the same at 19,000. Daze is still

selling in the low-tech market but it overlaps into the high-tech market as well, because it is in

the fine cut of both marketplaces. Our other product Donkey will not be out for a few months

into the year so we were not able to make any changes to it. Donkey remained at a size of 15.2

with a performance of 4.8, and a MTBF of 15,000. It is still a low-tech product and is in the fine

cut for low-tech. I think we made the correct decisions in R&D for round two because I believe

we have set our company up to sell a lot of product in the upcoming rounds.

Marketing

In round two marketing, we lowered the price of Daze from $33.50 to $33.00, we than lowered

the promo budget from $2,250 to $2,000, but kept the sales budget at $2,250. This raised our

awareness to 100% and our accessibility to 70% from the previous numbers of an awareness of

84% and accessibility of 52%. We set a projected sales forecast at 1,750 units for the upcoming

year. I think we priced Daze correctly because we are trying to capture the most market share

and to get the most sales in low-tech the products have to be the cheapest. I also believe we spent

enough on the sales and promo budgets because we got our awareness up to 100%. We can cut

that spending back next round and our accessibility is at 70% so we will be able to save money

in one place and spend more in the other to get the accessibility as close to 100% in the next

round. Last for Daze, I think we forecasted a little low because we did stock out so we could

have potentially sold more product. For our second product Donkey, we set a price at $31.25

because it is such a low-tech product we could make it cheap enough that we could sell it cheap
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and still make a decent margin on it. We spent $2,000 on a promo budget and $2,200 for the

sales budget, with these amounts we got our awareness and accessibility both up to 70%. For

Donkey, we forecasted 610 units hoping to catch 10% of the market with the cheapest product

available. I think we priced Donkey correctly because it was the cheapest product out there and

we did earn a 7% market share in its first round of production. I also think we had a correct sales

budget and promo budget because to have 70% awareness and accessibility after one round it

better than where Daze was after its first round. We may have forecasted a little aggressively

hoping to get 10% of the market so we do have 97 units left over but for a new product I think

we were very close.

Production

Based on our forecast for Daze we set a production schedule of 1,750 which ended up being

1,733 after adjustment. We did buy 200 more capacity for Daze to hopefully be able to create as

much as we can the next round and hopefully not stock out in round 3. We did not purchase any

automation for Daze because we wanted to free up money to spend on Donkey. For Donkey, we

set a production schedule at 650 so after adjustment we would have a couple extra products on

hand just in case we forecasted low. We also bought 331 capacity to be able to make almost

double what we could make the previous round. We next increased the automation from 1.0 to

2.3 to hopefully make our product even cheaper to produce. We kept the A/P lag days at 30. Our

maximum investment amount total was $11,127 and we spent $11,070 because we could not do

anything else without going over the max budget. I think we made good decisions in production

overall, the only thing I would have changed would have been to produce less Donkey and more

Daze.
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HR

In the first round of having HR available we cut the complement percentage down from 100% to

80% to keep some employees happy by not making everyone work overtime. Next, we increased

the recruiting spending to $900 to hopefully increase production and quality by having better

employees. The last part of HR we increased the training hours per year to 20 for the same

reasons as recruiting spending we are hoping to get better more qualified employees.

Finance

In round two we issued $2,220 worth of stock, and gave $.30 in dividends. Our current price per

share is $11.47, and we did not retire any stock. To finance for the improvements this year we

borrowed $2,000 worth of long term and current debt, and we did not retire any long-term debt

from the previous year. This round we did decrease the A/R lag days back down to 30 to free up

some capital. Our closing cash position last round was $7,082 and our closing cash positon this

round was only $611. This closing cash position may not look very good but we did spend a lot

more this year on plant improvements than the previous year. I feel like we did make good

decisions this round but we could have made a few better. One key decision we need to make it

to borrow more long term debt to free up more capital for things such as R&D.
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Conclusion

I do feel like we did well this round overall, we could have probably made more money hand had

a higher closing cash position but we did not need an emergency loan so we are still in good a

position. We got the same three stars as the previous round from profit, emergency loan, and

inventory, but we did not get a star in margin because our contribution margin is too low, and we

did not get any stars in stock price because our stock price fell by over $1.
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Team Digby Capsim Round 3


R&D

In round 3 we still only have two products in production and have not spent any R&D money on

another product in this round. Our first product is Daze and we started the round with specs at a

performance of 7.1, a size of 12.4, and a MTBF of 19,000. We made some slight changes to

Daze changing its performance to 7.6, its size to 11.9, and cut its MTBF to 17,500. Daze is a

middle of the line product, it is priced for the low-tech segment but it is just outside of being in

the fine cut for high-tech, but it is still in the rough cut so it has a chance to sell in both market

segments. Our second product, Donkey, started the round with a performance set at 4.8, a size of

15.2, and a MTBF of 15,000. We also made some slight adjustments to Donkey, increasing its

performance to 5.8, its size to 14.2, and we left its MTBF at 15,000. Donkey is a low-tech

product that is at the back end of the fine cut and is not in the rough cut for high-tech at all so it

does not sell at all if there are enough products produced to keep the market happy in high-tech.

As far as the competition goes there are about four other products with very similar numbers to

Daze with another three that are very close but just a little bit more different, but all the seven

competing products are priced very similarly. The competition for Donkey is only three other
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products but Donkey is the largest and lowest performance but it is the cheapest product so it

competes very well in the low-tech because the customers have a higher importance on price

than anything else.

Marketing

In round 3 for the marketing of Daze we kept the price of Daze at $33.00 because it was the

cheapest product with similar position we did not feel any need to lower the price this round. We

however drop the promo budget from $2,000 to $1,500 because its awareness is already at 100%.

We did this because $1,500 is the minimum to maintain the same percentage, and as we expected

the $1,500 worked and our awareness at the end of the round remained 100%. We kept our sales

budget at $2,250, this raised our customer accessibility to 82% from the previous round of 70%.

For Daze, we forecasted a little aggressive at 1,750 hoping to not stock out for the first round and

maximize our sales. I do believe our pricing was correct for Daze because it is still in the same

general pricing area as our closest competition and it is just as good of a product. I also believe

that we spent a perfect amount in sales budget and promo budget because we kept out same

awareness and increased our accessibility considerably as well. Lastly on Daze I think we

forecasted properly because we factored in losing some market share in high-tech and gaining

some in low-tech so we tried our best to find the middle ground. For Donkey, we also kept the

price at 31.25 because it is considerably cheaper than similarly positioned products. We raised

the promo budget to $2,200 which raised our awareness to 94% from the previous round of 70%,

and we also slightly raised our sales budget to $2,250 which raised our awareness to 82% from

the previous round of 70%. For Donkey, we forecasted more conservatively at 700 hoping to sell

as much as possible because we have such a high margin on Donkey. I do believe our pricing
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was correct because it is such a low-tech product compared to the rest the key selling point for it

is the price. I also believe we set a good sales budget and promo budget, we could have possibly

spent more on the sales budget to raise accessibility faster but we are very happy with a 12%

increase. Last for Donkey I do believe we forecasted properly, we are still not sure how it will

compete against the other products so we do not want to produce too much especially since last

round Donkey was all alone at the bottom of the low-tech market but this round it has three

competitors.

Production

Based on our forecasts in round 3 for Daze we set a production schedule of 1,767 which would

make our production after adjustment our 1,750 forecast, for Donkey we set a production

schedule of 575 which made our production after adjustment amount 569 and for Donkey we

also have 131 left from last year which would make 702 inventory at the end of the year. We did

not purchase any automation for either product this round because we can easily cover

production for each product and should have enough for any market share we might gain. As far

as automation goes we purchased an additional 1.0 automation for Daze, raising it from 3.0 to

4.0. We purchased more automation for Donkey we raised it 2.2 to make it to 4.5 from 2.3. The

reason purchased more automation for Donkey than Daze is because Donkey is so much cheaper

to product we are hoping to get its fixed cost to produce as low as possible to make a larger

margin on it. We did not make any changes to the A/P lag days because we want our suppliers to

not give us all the materials we need because we do not make payments to them in time. Our

maximum investment for round 3 was $15,951 and we only spent $11,440 of that, we did not

spend our max investment because we were not sure how this round would end up so we tried to
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cut a little bit of spending just in case we did not sell as much product as we had anticipated. I

did initially feel good about our decisions at the end of the round, but after seeing the results I

realize that we slightly over forecasted and over produced for Daze but it is nothing too severe. If

I could go back and change some decisions I would have reduced the production of Daze by 100

or 200 just to keep us from having as much inventory left over.

HR

In human resources for round three we cut our complement to 80% we cut this down because we

are not running at full capacity so we made the complement less to make it so only some of our

workers will have to work overtime and not every single employee. The next thing we did in HR

was increase recruiting spending by $600 to make it $1,500, we know that this may not make

any noticeable changes for a few years but it will hopefully lead to higher productivity. The last

thing in HR is the training hours per employee, and we doubled our training hours to make 40

hours per employee compared to only 20 the previous year. We spent more money in training

hours to hopefully increase our productivity index and lower our turnover rate.

Finance

For this round, we issued $2,000 worth of stock and gave out dividends of $0.25. The current

price of our stock is $9.50 and we retired $500 worth of stock. To finance our improvements this

round we borrowed $1,000 worth of short term debt, and issued $6,000 of long term debt. We

did not retire any long-term debt this round. We also did not make any changes to the A/P or A/R
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lag days because we did not want to cause any distrust from our suppliers or customers. Our cash

position this round was $1,107 compared to the $611 that it was last round. I do feel like we

made good decisions this round the only thing I would have possibly changed would be to have

issued more current debt for some extra cash next round to make plant improvements.

Conclusion

Round three did not go exactly as planned but it could have been considerably worse. In the

analyst report we managed to get 392 points out of a possible 1,000, which was the third best of

the six groups. Team Erie had the best round overall with over double the points of every group

except for one. Areas where we did the best in were financial structure and market share. We did

average in emergency loans and forecasting but all other areas were less than half of the points

earned. In the round analysis, we received two stars out of a possible of five. We earned a star in

profits because our company turned a profit for the year, it was only a little over $1.1 million but

it was still a profit. Next, we did not receive a star for contribution margin, a company with

margins below 30% may struggle long term, and our contribution margin was only 25.2% which

is up just slightly from the previous year. We also did not receive a star for emergency loans. Our

company had to take out a nearly $4 million emergency loan. The root cause of this loan was

from our inventory left over from our over producing of Daze. We did earn a star for inventory

because we had less than 60 days’ worth of inventory carry over into the next year. The last part

of the round analysis is stock price and we did not earn a star because our stock price fell by

$0.76 which is mainly due to our emergency loan.


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Team Digby Capsim Round 4


R&D

In round 4 we decided to step back in R&D and we did not make any changes to either of our

products. We were initially not sure if this would be a smart idea or not but we wanted our

products to get older to meet the buyer criteria for 29% of buyers in the low-tech segment. We

could not find out why our products were not selling like we had anticipated but this round we

realized that they were too young of products. We already had the low price, ideal MTBF, and a

close position, but the only thing that was keeping us from potential sales was the age. This

being said, Daze began and ended round 4 with a performance of 7.6, size of 11.8, and a MTBF

of 1,750, it is still a higher end low-tech product. This means Daze is priced and positioned as a

low-tech product but it is also in the fine cut for high-tech products so it is selling in both

markets. Donkey also began and ended round 4 with a performance of 5.8, a size of 14.2, and a

MTBF of 15,000. Donkey is strictly a low-tech product and is out of the rough cut for high-tech

and does not sell at all in the high-tech market. Based on the round 4 decisions I do believe we
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made the right decision because both of our products stocked out, so we clearly sold more

product than we had ever anticipated.

Marketing

In the marketing of Daze in round 4 we kept the price the same at $33.00 because it is cheaper

than most other similarly positioned products. We kept the promo budget at $1500 to keep our

awareness at 100%, and we increased our sales budget from $2,250 to $2,500 this raised our

accessibility to 90% compared to 82% last round. For Daze, we decided to forecast

conservatively compared to last round because of our emergency loan we decided we didn’t want

to risk over producing and getting our self into a bigger hole. We only forecasted to sell 1,550

units which should have covered our sales in low-tech but we did not add any extra sales in high-

tech because we were not sure how it would sell with newer high-tech products being released

every round. I do believe we priced Daze correctly because it is cheaper than all similar products

and price is the most important aspect for buyers in the low-tech segment. I also believe we had

proper sales and promo budgets because we kept our awareness at 100% and we also increased

our accessibility to 90%, which is the highest of any product. I do believe we forecasted

correctly, although we did stock out and could have potentially sold more products we safely

erased our emergency loan and can look towards growing in the future. In round 4 for Donkey

we lowered the price from $31.25 to $31.00 to hopefully keep it the cheapest product in the

market. We cut our promo budget from $2,200 to $2,000, we did this because our awareness last

round was 94% and we did not anticipate it would take as much to get it to 100%. We were

correct in our reasoning and ended the round with an awareness of 100%. We increased sales

budget from $2,250 to $2,500 because we wanted to get our accessibility as high as possible, this
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also worked because we got our accessibility up from 82% last round to 90% this round which is

higher than any other product. We thought we had forecasted a bit aggressively for Donkey at

800 but we stocked out. So, we must have forecasted very close. I do believe we priced Donkey

correctly because it is considerably cheaper than similar products, which is what we had planned

to do to hopefully capture market share faster than any other new products. I also believe we

spent the proper amount in sales budget and promo budgets because our awareness is 100% and

our accessibility is higher than any other group’s products at 90%. I also believe we forecasted

properly for Donkey because even though we stocked out we forecasted more than we had

initially expected to sell so our risk ended up paying off.

Production

Based on our forecast we decided to set a production schedule of 1,440 of Daze. After

adjustment, this ended up as 1,426 units, and we had 220 units left over from the previous round,

which gave us 1,646 units of inventory total. This is slightly more than our forecast but we tried

to have a few leftovers for the next round. For Donkey, we set a production schedule of 810, and

after adjustment we had 802 units with 0 left over from the previous round. This is only 2 more

than our forecast but we didn’t want to produce too many because we had already forecasted

higher than expected. We did not buy or sell any capacity for each product because we have

enough capacity to cover our maximum production as well as the production we could

potentially have next round from any reasonable market share gain. We did however purchase

automation for both Daze and Donkey. For Daze, we bought an additional 0.8 raising our

automation rating from 4.0 to 4.8. We also raised Donkey 0.8 points as well raising its

automation rating to 5.3 compared to 4.5 in round 3. We did not mess with the A/P or A/R days
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this round because we were focusing on erasing our emergency loan and did not want to take any

chances. Our maximum investment amount for this round was $18,443 and we only spent

$6,080. We probably should have spent more on improvements but we were trying to cut

spending anywhere we could to erase our emergency loan. I do think we made very good

decisions overall, we could have produced more of each product because we did stock out of

both but in a conservative round trying to overcome an emergency loan we did not want to take

any chances.

HR

In human resources for this round we did not make any changes from round three. The first thing

we did was we cut our complement to 80%, we cut this down because we are not running at full

capacity so we made the complement less to make it so only some of our workers will have to

work overtime and not every single employee. We kept the recruiting spending at $1,500, we

know that this may not make any noticeable changes for a few years but it will hopefully lead to

higher productivity. The last thing in HR is the training hours per employee and we did keep this

at $40. We spent this money in training hours to hopefully increase our productivity index and

lower our turnover rate.

Finance

In the finance section of round 4 we issued another $2,000 worth of stock and retired $500. We

did this to rotate stocks and hopefully cause a beneficial shift in the stock market. We gave away
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$0.25 dividends per share to keep our stockholders happy. Our current stock price is at $8.75

which is down $0.75 from the previous round but our emergency loan is the preliminary reason

why. To finance, for improvements, we borrowed $1,000 worth of short term debt and an

additional $8,000 worth of long term debt to hopefully give us extra money next round. We did

not retire any long-term debt and we did not change the A/R lag days. Our cash position at the

end of this round is $7,253 higher than last round mainly due to the fact we decided to borrow

more money than usual, and we had a major cut in spending. I do believe we made very good

decisions, and the only areas for improvement would be to issue more dividends to hopefully

drive up stock prices, and borrow less long term debt and issue more short term debt just to

balance our debts.

TQM

Round 4 is the first round of TQM in the Capsim simulation and it did not come at a great time

for our team because we are skeptical about spending money in unfamiliar areas due to our

struggles last round. Because of this we only spend $3,000 total and only invested in three of the

ten categories. We spent $1,000 in benchmarking to reduce fixed costs and hopefully increase

our margins. We also spent $1,000 in CCE/6 sigma training to reduce labor and material costs to

hopefully increase our margins as well. The final thing we invested in in TQM was $1,000 in

GEMI TQEM sustainability initiatives to reduce material and labor costs as well. We put in

various amounts in various other parts of TQM but for the round we were trying to have we

determined that these three would provide us with the most impact at the cheapest price.

Conclusion
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Round 4 was our best round yet, in the analyst report we earned 576 points out of a possible

1,000 points. This was second overall only behind team Erie who had 735, but it was over 200

more than any of the lower groups. The areas we did the best in this round are financial structure,

productivity, market share, working capital, and emergency loans. Areas we did average in were

profits, margins, and wealth creation, and we did very poorly in customer satisfaction and

forecasting. In the round analysis, we received all five of the possible stars. We earned a profit in

round four of nearly $5 million which is considerably more than in any other of the previous

rounds. We also got a star for our contribution margin, which jumped 9% from last round to be

34% for round four. We also received a star for emergency loan because we had good enough

cash management to avoid needing an emergency loan. We received a star in inventory because

we did not have any excess inventory, this could potentially be as bad as good because we did

not maximize our sales because we could have potentially sold many more units of our products.

The last part we received a star for was stock price. Our stock price raised $6.88 this round, this

was due to making more conservative decisions that did not jeopardize our company’s success.
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Team Digby Capsim Round 5


R&D

In round 5 we still only have our two products we did not spend too much money on R&D for a

new product this round because we wanted to cut our spending just in case our forecasting was

off. For Daze, we made slight improvements to our performance and size, raising our

performance from 7.6 to 8.7 and decreasing our size from 11.9 to 10.8. We did however keep our

MTBF the same at 17,500. Daze is priced and positioned as a low-tech product but it is also in

the fine cut for high-tech products so it is selling in both markets. Our second product Donkey

also got a slight improvement in performance and size as well. We increased the performance

from 5.8 to 6.6 and decreased the size from 14.2 to 13.4. We also kept the MTBF of Donkey at

15,000 which is the same as the previous round. Donkey is strictly a low-tech product and is out

of the rough cut for high-tech and does not sell at all in the high-tech market. Based on the
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outcome from round 5 I believe we made very good decisions because we did stock out of both

products so we met all the customer buying criteria for the low-tech market segment.

Marketing

In round 5 marketing for Daze we cut the price from $33.00 to $32.00. We cut the price so

drastically in this round because we kept it the same from round 3 to round 4 but here in round 5

there are other very similar products that are priced lower so we are hoping to undercut these

other products to gain more market share and follow along into our strategy of gaining the most

market share in the low-tech before the simulation ends. We kept our promo budget at $1,500

because our awareness is already at 100% and just as it should it ended the round at 100% as

well. We cut our sales budget from $2,500 to $2,250 to hopefully get our accessibility to 100%,

but it was not enough to do so and we only raised our accessibility from 90% to 95% which is

still higher than any other product in low-tech. We forecasted conservatively at 1,776 units of

Daze which was lower than we anticipated but we wanted to be cautious for another round

before we start forecasting aggressively again. I do believe we priced our product correctly

because we did stock out, and price has the highest importance for customer buying criteria in

the low-tech segment. I also think we spent the correct amount for sales and promo budgets

because we kept our awareness at 100% and we got our accessibility all the way to 95%. I do

however think we did forecast low this round but it was also our plan to intentionally do so, but

after seeing how much actual market share we ended up with compared to how much market

share we could have potentially captured I realize that we did forecast considerably lower than

we could have sold. For Donkey, we cut the price back from $31.00 to $30.75. It was only a

slight price reduction but Donkey is considerably cheaper than any similarly positioned products
D i g b y | 25

so we only cut it by $0.25 to hopefully keep our customers happy. We cut our promo budget

back from $2,000 to $1,500 because our awareness was 100% at the end of round 4 and that is

all that is required to keep it at 100%. In doing this we ended round 5 with 100% customer

awareness as well. We next cut the sales budget from $2,500 to $2,250 we had hoped this would

be enough to raise our accessibility to 100% but it was only enough to raise it from 90% to 95%.

We forecasted a conservative 900 for the same reason as Daze, we wanted to be conservative for

one more round to get a feel of the market now that there is a considerably higher amount of

product demand in the market. I do believe we priced properly because we stocked out and were

also the cheapest product on the market. I also believe we spent enough is sales and promo

budgets because we ended the round with an accessibility of 95% and an awareness of 100%. I

do believe we forecasted too low for Donkey as well because our actual market share was

roughly 6% lower than our potential market share.

Production

In round 5 we set a production schedule of 1,786 for Daze so our production after adjustment

would be our 1,776 forecast. We did not purchase any capacity for Daze because we have more

than enough to produce our maximum amount we would need for the next round. We purchased

only 0.2 automation to raise our automation level from 4.8 to 5.0. For Donkey, we set a

production schedule of 905 so our production after adjustment would be our 900 forecast. We

did buy 100 capacity for Donkey to get closer to covering our first shift capacity without having

to hire too many new employees or making too many of our current employees work overtime.

We also purchase a little bit of automation for Donkey raising or automation level from 5.3 to

5.5. Next, we did slightly lower our accounts payable lag days from 30 days to 25 days we did

this to hopefully keep our suppliers happy and keep their trust in our company by paying them
D i g b y | 26

back sooner than expected. Our maximum investment for round 5 was $15,860 and we only

spent $4,320 of that because we did not see the need to spend any more on our current products

and we do not have a new product coming out next year so we tried to cut spending in

production to have some extra to spend in TQM. I do feel good about all the decisions in

production. The only thing I would have done differently would have been to over produce so if

our forecast was close we could have had some extra inventory so we could have made more

sales.

HR

In human resources for this round we did not make many changes from round 4. The first thing

we did was we cut our complement to 95%, we cut this down because we are not running at full

capacity so we made the complement less to make it so only some of our workers will have to

work overtime and not every single employee. We kept the recruiting spending at $1,500, we

know that this may not make any noticeable changes for a few years but it will hopefully lead to

higher productivity. The last thing in HR is the training hours per employee and we did keep this

at $40. We spent this money in training hours to hopefully increase our productivity index and

lower our turnover rate.

Finance

In the financing for round 5 we issued $500 worth of stock as well as retired $500 worth of stock

to make it appear that our stock is being circulated throughout the market. We also gave out

dividends of $0.69 to keep our spending from dividends to under $2000. Our current price per

share is $22.96 which is over $7.00 per share earned. To finance improvements this round we
D i g b y | 27

borrowed $2,000 worth of current debt and an additional $2,000 of long term debt. We also

decided to retire $500 worth of long term debt to slightly cut our interest payment due next

round. This round we also decided to adjust our accounts receivable lag days, we increased this

from 30 days to 35 days to hopefully draw in more customers because they have an additional 5

days to make payment which could potentially increase customers because if two products are

very similar they may look at a product and see that they have a few additional days to pay for it.

Our cash positon last round was $11,315 and at the end of this round it was $13,892. I believe we

mad very good decisions in finance the only thing I would have potentially changed would be to

buy back some stock to hopefully drive a price increase per share due to there being less stock

available.

TQM

In round 4 we did not have that much extra money to spend in TQM but in round 5 we have a

considerable more amount of cash to work with so we spent a lot more in TQM to hopefully

make our business more successful and efficient. We decided to spend $500 in CPI systems

because they decrease reductions in material costs which will hopefully increase our margins.

We also spent $500 in Vendor/JIT to reduce material costs and decrease administration costs, we

hoped this would increase our margins as well as help cut spending. Next, we spend $1,000 in

channel support systems because it increases the demand for our products. We also spend $500

in concurrent engineering because it slows a product down in the perceptual map which will help

because both of our products are getting very close to being out of our targeted positioning. We

than spent an additional $500 in UNEP green programs because it reduces material costs as well
D i g b y | 28

as raises product demand. We spent $500 in benchmarking to cut spending by reducing

administration costs. We also spent $500 in quality function deployment effort because it reduces

R&D time, the speed a product moves on the perceptual map, and it also raises the demand for

our products. The last thing we did in TQM was spend $500 for GEMI/ TQEM sustainability

initiatives because it reduces material costs and cuts labor costs.

Conclusion

I feel good about what we have done the past two round and I believe we are finally

understanding everything well enough to take more risks and hopefully become a more

successful company. In the round analysis, we received 4 out of a possible 5 stars which is the

second most we have gotten up to this point. We received our first star for our profits, because

we had a profit of $7.3 million. The second star we received was for our contribution margin

because our corporate contribution margin was 38.2% and all that is needed for a company to

have long term success is roughly 30%. We got our third star because we did not have to take out

an emergency loan. This means we did almost everything right this round and kept the company

successful for at least one more year. Our fourth star was for our stock price. We got a star here

because ours stock price is over $15.00 and since it raised by $7.34 we kept our stockholders

happy. The only area we did not get a star in was inventory, this was because we stocked out in

both of our products before we were able to able to generate over 95% of our potential industry

sales. Some areas we did very well in this round were our margins, profits, emergency loan,

market share, productivity, financial structure, and wealth creation. The only areas we did not do

very well in were forecasting because we forecasted too low and stocked out in both products,

and in customer satisfaction because Daze is still selling in the high-tech market segment but it
D i g b y | 29

does not meet any requirements for a high-tech product this causes a lower customer satisfaction

survey and drags it down from our two products in the low-tech segment.

Team Digby Capsim Round 6


R&D

In R&D for Daze in round 6 we kept everything the same, we did this to age Daze slightly to

make it better fit the customer buying criteria. We kept the performance 8.7, the size 10.8, and

the MTBF at 17,500. This makes Daze a low-tech product and it did stay inside the fine cut for

the low-tech market but by not improving it even just a little bit it fell out of the fine cut for high-

tech for the first time so far in the simulation. Based on the round outcome I do believe this was

the right decision because we did take over and Daze is now the best-selling product in the low-

tech marketplace. We did however improve Donkey considerably in this round. We increased the

size from 6.6 to 7.6, and decreased the size from 13.4 to 12.4, but we did leave the MTBF at

15,000. Donkey is a low-tech product and sits in the fine cut for the low-tech market but is just
D i g b y | 30

outside the rough cut for the high-tech market. I also believe that we made the right decisions for

Donkey because we advanced its parameters enough this round that we can let it sit still the next

round and increase its age, like we did this round for Daze.

Marketing

We did not make any changes in the marketing of either of our products this round. For Daze, we

kept the price at $32.00, which is what it was last round. We decided to keep it the same over

lowering the price because it is considerably cheaper than all the similarly positioned products.

We kept the promo budget at $1,500 because our awareness is already at 100% and we want to

keep it at 100%. We also kept the sales budget the same at $2,250. We had hoped this would be

enough to get our accessibility to 100% but it only raised it from 95% to 99%. We forecasted

2,100 units this round, which was considerably higher than we calculated but after forecasting

low the last two rounds we wanted to figure aggressively and hopefully not stock out. I do feel

we priced correctly because of how much cheaper our product was compared to other similar

products. I also feel we spent enough on sales and promo budgets because our awareness is at

100% and our accessibility is at 99%. I also think we forecasted properly because we may have

had over 200 units left in inventory but we did not stock out and we now know that we made

every possible sale. Donkey was marketed the same as Daze, we kept the price at $30.75, which

was the same as the previous round. We did not lower the price because it is cheaper than all the

similar products. We also kept our promo budget at $1500, which is also the same as the

previous round. We left this the same because our awareness is already at 100% and we wanted

to keep it there. Our sales budget remained untouched as well, we kept it at $2,250 because we

hoped it would raise our accessibility to 100% but it only raised it from 95% to 99%. For
D i g b y | 31

Donkey, we also forecasted more aggressive than usual. We forecasted 1,200 units to hopefully

not stock out and make all the possible sales. I believe we priced Donkey correctly because it is

cheaper than all similar products. I also think we also set our sales budget and promo budget

correctly because our awareness remained at 100% and our accessibility raised to 99%. I also

believe our forecast was correct because we only had 43 units left, which means we made all the

possible sales but did not over produce to the point it could have potentially hurt the company.

Production

In round 6 we decided to make more and spend more than we have typically do. We set a

production schedule of 2200 for Daze, this left us with 2,187 units after adjustment. This is

slightly more than our forecast at 2,100, but we wanted to make sure we did not run out of

product this round. We decided to buy an additional 200 capacity for Daze, because we were

worried if we gained market share like we anticipate we will not be able to produce enough of

Daze to satisfy the market demand. We than purchased an additional 0.5 automation, to raise our

automation rating from 5.0 to 5.5. We decided to increase this to hopefully decrease costs and

hopefully increase our margins. For Donkey, we set a production schedule of 1,207 to make our

production after adjustment 1,200, which is exactly our forecast. We decided to purchase an

additional 100 capacity for Donkey, we did not necessarily need it this round or the next but we

wanted to have enough capacity to hopefully decrease our amount of overtime needed to meet

our production schedule. Just as we did for Daze we increased the automation of Donkey by 0.5

to make it 6.0 compared to 5.5 the previous round. We did this to reduce costs on Donkey and

gain more margin. This round spent $12,600 for plant improvements, and we spent considerably

more than in previous rounds on improvements but it was still less than our maximum
D i g b y | 32

investment amount. The las thing we did was keep our A/P lag days at 25, which is 5 days less

than we started with but we hope it will raise our supplier’s confidence in our company and help

us get all the materials we need to conduct business. Based on the outcome of the round I believe

we made very good decisions, and have gotten ourselves in a good position for the future.

HR

In human resources for this round we did not make many changes from round 5. We did not

make any changes to our compliment, we kept it at 100% because we were running at almost full

capacity. We kept the recruiting spending at $1,500, we know that this may not make any

noticeable changes for a few years but it will hopefully lead to higher productivity. The last thing

in HR is the training hours per employee and we did keep this at $40. We spent this money in

training hours to hopefully increase our productivity index and lower our turnover rate.

Finance

This round we decided to spend our money in finance differently than we had in previous

rounds. We issued $500 worth of stock but we decided to also retire $1,500. We did this to force

our stock to change hands but we also wanted to buy more stock back to lower the amount of

stock shares available, and hopefully drive our stock prices up. We gave out dividends of $0.60

which is lower than the previous rounds but it is $0.10 higher than the next company’s stock

dividends. Our current stock price is $32.14 which is up $9.18 from last year. To finance the

improvements, we issued $1,000 worth of current debt, and retired $2,000 worth of current debt.

We than retired $1,000 worth of long term debt, but we issued an additional $3,000 to have

enough cash on hand just in case this round does not go how we expect. We finally kept our A/R
D i g b y | 33

lag days at 35 which is more than it originally was, we increased this to hopefully increase

customer demand because they will have an additional 5 days to pay when they buy our product.

Our cash position at the end of the round was $13,402, which is slightly less than the $14,828

cash position we had last round. I do think we made all correct decisions, even though our cash

positon is lower it is still very close considering how much extra we spend in production.

TQM

Just as in last round we spend a lot of money in TQM improvements. We started off spending

$500 on CPI systems, we invested in this to reduce our material costs and hopefully increase our

margins. We than spent $500 on Vendor/ JIT, we invested here to reduce material costs, and

administration costs. We did this because it cuts our overhead expenses as well as helps increase

margins. Next, we spent $500 on quality initiative training, this reduces labor costs and will

hopefully increase our margins. We decided to spend more on channel support systems than any

other part of TQM because it increases the demand for our products. We decided to spend $1,000

here because it made a considerable change compared to if we would have spent less. We than

decided to spend $500 on concurrent engineering, UNEP green programs, quality function

deployment effort, and CCE/ 6 sigma training. We spent our money in these areas because they

reduced R&D cycle time, raised demand for our products, and reduced costs. Our goal in TQM

was to spend the same amount as last round, this was our goal because we are leading or a leader

in every TQM category and would like to stay that way.

Conclusion
D i g b y | 34

In the round 6 analysis we received 5 out of 5 possible stars. We did great this round but so did

every other group, we had hoped to close the gap between us and team Erie and pull away from

every other group but with everyone’s success there was no real change in positioning. We

received our first star for our profits. We had a profit of $11,027,214, which is higher than any

other round to this point. We got our second star for our contribution margin. Our contribution

margin is just under 40% and all that is needed for long term success is roughly 30%, so we are

sitting very good, and considerably ahead of where we need to be. We got our third star in

emergency loans, because we have good cash management and did not need to take out an

emergency loan this round. We got our fourth star in inventory because we did not have more

than 90 days of inventory carry over from the previous year, as well as we reached over 95% of

our potential industry unit sales. We got our final star because of our stock price. We got a star

because our stock price was over $15. Our stock price increased $9.18 and we gave out $0.60

dividends per share which should make our stockholders very happy. In the round 6 analysists

report we also did better than usual. We got the second highest amount of points for the round

and increased to the second highest amount of points cumulatively. We received full points in

margins, emergency loans, working capital, and forecasting. We received the majority of points

for profits, market share, and productivity. The last things we did average in are customer

satisfaction, financial structure, and wealth creation.


D i g b y | 35

Team Digby Capsim Round 7


R&D

In the R&D portion of round 7 we decided to make a large enough improvement on Daze to get

into a better position for the final round. We raised the performance 1.2 points to make it 9.9

compared to 8.7 in the previous round. We also decreased the size by 1.2 points to make it end at
D i g b y | 36

9.6 compared to 10.8 the previous round. The only thing we did not change on Daze was the

MTBF, which we left at 17,500. Daze is still a top of the line low-tech product that also fits into

the fine cut for the high-tech market segment. Based on the outcome of the round we probably

should have made different changes to Daze because we sold less this round than the previous,

however the only thing I believe we could have done differently would to have been to make less

drastic changes and do a slight revision this round and the next. For Donkey, we did not make

any changes to the products performance, size, or MTBF. The size remained 7.6 the performance

remained 12.4, and the MTBF remained 15,000. Donkey is a low end low-tech product and does

fit into the low-tech market segment fine cut but it is completely outside of the rough cut for

high-tech, and does not sell at all in the high-tech market. Based on the outcome of round 7 I

believe we made a perfect decision to let Donkey sit and increase the age. We did this to raise the

age to get it to more closely match the customer buying criteria. I think this was the best decision

possible because we forecasted aggressively and ended up stocking out.

Marketing

Marketing is the area where we decided to try to take our strategy of having the cheapest

products to gain market share and test its impact on our success. We decided to have a more

drastic price drop to hopefully capture more of the low-tech market segment. We decided to cut

the price of Daze by $0.75. This made our ending price $31.25, compared to a $32.00 starting

price. We kept our promo budget at $1,500 to maintain our 100% customer awareness. We did

however cut our sales budget from $2,250 to $1,750. We did this because our accessibility was at

99% and we did not want to overspend to get it to 100%. This was apparently enough because

our ending accessibility is finally at 100%. We decided to forecast aggressively at 2,200. We


D i g b y | 37

were hoping that cutting our price so much would drive up our sales. I am on the fence if we

priced Daze correctly or not. I believe cutting the price probably did help us make some of our

sales but I am not sure if we dropped the price too much for one round. I do however believe we

spent the correct amount in both sales and promo budgets simply because our awareness and

accessibility are both currently at 100%. Lastly for Daze I believe we forecasted correctly. Our

forecast was slightly higher than we anticipated but we did not want to stock out and we may

have quite a few left over in inventory but it was not enough to make a critical impact on our

company. For Donkey, we tried to do the same as Daze. We cut the price by $0.75, making its

ending price $30.00 compared to $30.75 last round. We also kept our promo budget as $1,500 to

maintain our 100% customer awareness. Next, we spent the same $1,750 on our sales budget to

hopefully get our accessibility to 100%. Just as it did for Daze this raised our accessibility from

99% to 100%. Also, just like for Daze we forecasted Donkey slightly higher than we anticipated

to sell. We set a sales forecast of 1,300 units. I do believe we priced Donkey correctly for this

round because it did unfortunately stock out, so we sold considerably more than anticipated, but

we did not produce enough just in case inventory to cover such an event. I also believe we spent

correctly on sales and promo budgets because our awareness and accessibility both ended up at

100% at the end of the round. Lastly, I believe we forecasted correctly. We may have stocked out

because we did not produce enough but we considered forecasting less. We may not have made

all the possible sales for Donkey but we got considerably more than we could have potentially

made.

Production
D i g b y | 38

Based on our forecast of 2,200 units of Daze we decided to produce 2,100 units this round. Once

we added our production after adjustment, and the inventory we had left on hand we anticipated

having just over 2,300 units of Daze on hand. This is slightly higher than our forecast but we

wanted to have some extra inventory just in case we sold more than anticipated. We did buy an

additional 200 capacity for Daze because we are anticipating a sizeable growth in sales and want

to make sure we have enough capacity to cover any market share growth. We also decided to

increase our automation rating by 0.5 to raise it from 5.5 to 6.0. We did this to hopefully cut

down on labor costs and increase our margins. For Donkey, we forecasted 1,300 units sold.

Based on this forecast we decided to set a production schedule of 1,365 so our production after

adjustment would be 1,357, this added to our 43 units in inventory left over from last year would

give us 1,400 units of Donkey. We had hoped this would be enough extra inventory to cover any

excess sales. We did not purchase any capacity for Donkey because we believe we have enough

to cover any growth in sales for the next year or so. We did however increase our automation

level by an additional 0.5, this made our ending automation level 6.5 compared to the 6.0 it was

last round. We did not make any changes to the A/P lag days this round, we kept it at 25, we did

not want to get our A/P lag days too much lower than our A/R lag days and end up hurting rather

than helping our company. Our max investment for round 7 was $30,260 but we only decided to

spend $10,600 of that amount. We did not spend any more of this because we did not see any

real benefit because we are currently in a great positon for every part of production. I believe we

made very good decisions in production. The only thing I would have changed if I knew what the

outcome was going to be would have been to cut the production of Daze and increase the

production of Donkey to hopefully have a little bit of inventory left over for both products

instead of so much of Daze and none of Donkey.


D i g b y | 39

HR

We finally decided to make a slight change in HR after not touching it for the past few rounds.

We did keep our compliment at 100%. We did this because of how much we are producing

compared to how much we can produce. The change we decided to finally make in HR was to

increase our recruiting spending. We bumped this up $500 to make it $2,000 compared to the

$1,500 it has been for the past few rounds. We decided to do this because after looking at some

of the other companies they were spending this amount also so we tried to match what they were

spending. Last, we decided to keep the training hours the same as the previous rounds at 40

hours. We decided to keep this 40 hours because after looking at the other groups no one was

having any more than 40 training hours so we decided to keep it and stay the same as the other

groups.

Finance

In finance, just as in every other aspect of round 7 we decided to keep our decision making the

same as in the previous two rounds. We issued $500 worth of new stocks this round but we also

retired $2,000 worth of stocks. We did this to decrease the amount of stock we had available to

hopefully drive our stock price up, but we also wanted to issue some stock to keep it circulating.

This would hopefully get more people opportunities to purchase our stock. Along with this we

decided to give out $0.51 dividends per share. We did this because it is $0.01 more than any

group has been doing so we wanted to give out higher dividends to hopefully give our stock

more value. The current price of our stock is $32.14 and it is projected to gain $5.94 this round.

We did not do as much financing this round as we probably should have. We had access to a
D i g b y | 40

huge amount of capital but we only decided to borrow $3,000 worth of current debt, and we did

not issue any long-term debt this round, and retired $1,000 worth of long term debt. We next

increased our A/R lag days from 35 to 40 days, we did this to hopefully increase the demand for

our products because potential buyers have an additional 10 days to pay for our product

compared to some of the competition. Our cash positon last round was $9,858 and this round it is

nearly $6,000 higher at $15,439. I feel like we made very good decisions this round, the only

thig I would have changed would probably be to issue some long-term debt just to have excess

capital next round.

TQM

In round 7 TQM we kept the pattern of sticking to what worked for us in the previous two

rounds. We spent the same amount of cash in TQM improvements and scattered our spending

out to gain more small benefits in a few different ways. We spent $500 on CPI systems to reduce

material costs to hopefully increase our margins. We also spent $500 on Vendor/JTI, we did this

to reduce material costs as well as administration costs. This not only helps increase our margins,

but it also reduces our fixed costs. We decided to spend a little more on Quality Initiative

Training, we had not spent very much money here in the previous rounds so we wanted to spend

a little extra here because reduces labor costs which will help increase our margins. We spent

$500 this round on concurrent Engineering because it cuts down on R&D time, and because we

had a more drastic change in R&D for Daze we wanted to cut down the R&D time to get the new

version out on the market sooner. We also spent $500 on UNEP Green Programs, this reduces

material costs as well as raises demand for our products. This helps greatly because it increases

our margins and it increase the demand so we can hopefully sell more of our products. We than
D i g b y | 41

spent $500 for Quality Function Deployment Effort for a similar reason as UNEP Green

Programs, because it increases the demand for our products. Next, we spent $500 on CCE/ 6

Sigma Training, this cut both labor and material costs which should have a considerable impact

on our margins. The last part of TQM we invested in was GEMI TQEM Sustainability

Initiatives, this also reduces material and labor costs, and should increase our margins.

Conclusion

In round 7 we received all 5 possible stars again. We did very well this round but unlike last

round only 4 groups received all 5 stars this helped us surpass the Baldwin Company by 1 star

and gave us a tie for second in cumulative stars. We received our first star for our profits for the

round. We had a profit of $14,741,833. This is our highest profit to date and we look forward to

seeing this upward trend next round. We got our second star for our contribution margin. A

contribution margin of 30% is a good benchmark for long term success, and our combined

contribution margin for both of our products is 43.2%. Our third star came from not having an

emergency loan this round. This is because of our good cash management and having a large

enough working capital to take some risks and still be in good shape after the rounds conclusion.

Our fourth star came from our inventory. We did stock out of Donkey, and had over 400 units of

Daze left over, but we did satisfy nearly 100% of our potential industry sales. We did not have

any more than 90 days of inventory carry over into the next round. Our final star came from our

stock price. Our stock price raised by $11.11 this round which should more than satisfy our stock

holders. We also did very well this round in the analysist report. We received the third most

points this round and still have the second most cumulative points. The areas we did very well in

and received full points in are margins, profits, emergency loans, working capital, and
D i g b y | 42

productivity. After these areas, our next best was only 60 points out of 100 and that was in

wealth creation. Than we only received 50 out of 100 points in both forecasting and financial

structures. Than we are doing the worst in market share and customer satisfaction. We are losing

ground in our market share, and that is why we did so poorly in the analysist report there, but I

cannot understand why we are receiving 0 points for customer satisfaction the only thing I can

guess that because Daze does sell in high-tech it does not receive a high customer satisfaction

rating even though it is priced and positioned as a low-tech product.


D i g b y | 43

Team Digby Capsim Round 8


R&D

In the final round of the simulation we made the decision to let both of our products remain

untouched. We did this to hopefully allow them to age and get exactly where customers in the

low-tech market segment want their products. Daze began and ended the year with a

performance of 9.9, a size of 9.6, and a MTBF of 17,500. Our beginning of the year age was 2.2

years old, and the customer buying criteria places a very high importance on the age of a low-

tech product to be 3 years old. As it has been ever since round 1 Daze is a low-tech product and

it fits into the fine cut for both low and high-tech market segments. Based on the outcome of

round 8 I believe we made very smart decisions because we sold considerably more units than

we had ever anticipated. We did the same for Donkey because of the same reasoning. Donkey

began and ended the round with a performance of 7.6, a size of 12.4, and a MTBF of 15,000. The

starting age of Donkey was 2.6 years and we did not make any changes to Donkey because we

wanted to get the age as close to 3 years for as long as we could. Donkey is a very low-tech

product and is only in the fine cut for low-tech, and it is not even in the rough cut for high-tech,

so it will not sell in that marketplace at all. Based on the outcome for round 8 we maybe should

have made a slight improvement to Donkey because it may have gotten too old and did not sell

as well as we had hoped.

Marketing

Round 8’s marketing was very similar to R&D, we did not make very many changes. We

lowered the price of Daze by $0.10, this changed the price from $31.25 to $31.15. Our products

are considerably cheaper than our closest competitors but we decided to go with a slight price

drop because we did not make any updates. We spent $1,500 on both sales and promo budgets
D i g b y | 44

because it was supposed to be the minimum amount needed to spend to keep awareness and

accessibility the same as the previous round. We have had good success using this amount in

every round prior but this round our awareness stayed at 100% but our accessibility dropped

from 100% to 98%. We tried to forecast very accurate this final round and set a forecast of 2,100

units. We used the same reasoning on Donkey as well. We dropped the price by $0.10 making

Donkey go from $30.00 to $29.90 because we did a large price drop last round we decided to do

a slight price drop this round because we did not update the product at all. We also spent $1,500

on both sales and promo budgets to hopefully keep out percentage of awareness and accessibility

the same as last round. Unlike on Daze our $1,500 investment on both went as planned and our

awareness remained 100% as well as our accessibility remained 100%. The main difference

between our products this round was we forecasted aggressively on Donkey because we stocked

our last round. Our forecast was 1,550 and we planned to over produce just in case it sells better

than we anticipate. I do feel like we priced both of our products correctly this round because

even though they are already cheaper than similar products it could potentially hurt our sales if

everyone else improves their products and we do not and don’t drop the price to compensate. I

also think we spend the correct amount on sales and promo budgets because our awareness and

accessibility remained just as high as any other company. What I do not understand about our

sales budget for Daze is it dropped by 2% but that drop did not cause our company any harm.

Finally, I believe we forecasted both of our products very well. Daze has slowed considerably

and isn’t capturing any more market share so we tried to stay conservative, but Donkey has been

steadily growing so we forecasted more aggressively to hopefully capture more market share in

low-tech.
D i g b y | 45

Production

Based on our forecast for Daze we set a production schedule of 1,710 units to be produced. This

left our production after adjustment at 1,700 than we added our inventory on hand of 421 and

ended up with 2,121 units of Daze available to be sold. This round we decided to try something

we had not done up to this point in the simulation and we sold 400 capacity of Daze. We did this

because it is the final round and we had more than enough capacity so we sold some of the

excess to gain some extra capital with the intention of giving our stockholders very high

dividends. Also, we did not raise our automation rating. We kept our automation rating at 6.0

because we did not want to spend any unnecessary money because automation doesn’t go into

effect for another round and it would not have benefited us at all to increase it. For Donkey, we

wet a production schedule of 1,710, so our production after adjustment is 1,700. This is

considerably higher than our forecast of 1,550 but we wanted to forecast lower than we produced

because we wanted to have extra inventory in case we would sell more than we expected. We did

not buy or sell any capacity for Donkey because our capacity level is currently very close to what

we expect to sell. We also did not purchase any automation because it would not have helped us

at all. We than left our A/P lag days at 25 we had considered lowering this but we did not know

if it was worth the risk this late into the simulation. Our maximum investment this round was

$43,012 and we did not spend any of this, we gained an additional $7,800 from selling our

automation. We did not see any benefit to making any improvements in production because it is

the final round. I do believe we made as good as decisions as possible for the current situation,

and I would not have made any different decisions this round.
D i g b y | 46

HR

This round in HR we did not make any changes from the previous round. We kept our

compliment at 100% to keep things running smoothly in production. We kept our recruiting

spending at $2,000. We did not spend any extra money in HR because we are in the same general

area for recruiting spending as most of the other groups. Finally, we did not make any changes to

our training hours. We did not make any changes here because just as in recruiting spending we

have very similar training hours as the other companies.

Finance

Round 8’s finance was geared towards raising our stock price as much as possible. We did not

issue any new stock this round. We bought back $6,070 worth of existing stock. We purchased

back as mush stock as possible to hopefully drastically cut down our shares outstanding and

drive our price up. The current price of our stock is $43.25, and we are giving out a $5.00

dividend per share to hopefully drive our stock price up as well. To finance improvements this

round we borrowed $5,000 worth of current debt. We did not need to borrow this money but we

decided to borrow some money to help our leverage. We however did not borrow any long-term

debt. We paid back $1,000 worth of long term debt to lower our days of working capital. We did

not change our A/R lag days, we left this at 40 days which is hopefully higher than any other

group and helps our company attract customers. Our cash position the previous round was

$11,547 compared to $21,151 this round. Our closing cash position could have been

considerably higher but we did not need this much cash on hand so we decided to spend almost

$20,000 to reduce our cash on hand. I feel like we made very smart decisions this round the only

thing I would have potentially changed would be to give out higher dividends and potentially
D i g b y | 47

retire less long term debt and give out even higher dividends yet, I would have done this to

hopefully raise our stock price by even more than it currently did.

TQM

In the TQM section of round 8 we cut spending compared to the previous rounds as well.

However, we did this for a reason other than simply cutting spending. We invested $500 in CPI

systems, Vendor/JIT, Quality Initiative Training, Concurrent Engineering, UNEP Green

Program, Benchmarking, and Quality Function Deployment Effort. We spent our money in these

areas to hopefully reduce material and labor costs, as well as cut administration costs, and to

increase the demand for our products. We spent only $500 on these certain categories because

this raised our total spending in TQM to $2,000 per each category throughout every round with

TQM. We decided to cap our spending at $2,000 because in the TQM area it says that

diminishing returns occur after spending any more than $2,000 so we had hoped to maximize the

all the possible effects of TQM.

Conclusion

Round 8 was another great success for the Digby Company. We received the full five stars on the

round analysis. What made this even better than just getting the full five stars is that the Andrews

Company only received four stars, this allowed us to end the simulation with one more star than

them and be in second place in total stars all by ourselves. We received our first star for our

profits. Our year end profit for round 8 was $21,750,320, this is $7,000,000 higher than in round

7. We got our next star for our outstanding contribution margin. A good contribution margin to

have for long term success is roughly 30% and our average contribution margin for both of our
D i g b y | 48

products is 46.2%. We got our third star for not needing an emergency loan this round. We made

good decisions and they worked how we expected them to and did not need a bail out. Our fourth

star came in inventory. We got a star in inventory even though we stocked out in Daze, because

we gained over 95% of our potential market share as well as we did not have more than 90 days’

worth of inventory carry over into the next year. Our final star came from our stock price. Our

stock price raised by $17.75 from last round which is considerably higher than we anticipated

and that along with our $5.00 dividends per share should make our stock holders very happy. We

also had a very successful round based on our analyst report. We received 100% of points

possible in our margins, profits, emergency loan, and productivity. We received 90% of possible

points for our wealth creation. We received only 50% of possible points for working capital and

financial structure. We only received 40% of possible points for our market share. As always,

we did not receive any points for our customer satisfaction, we still believe this because Daze

sells some in the high-tech market so it receives low satisfaction scores, because it is a low-tech

product.
D i g b y | 49

Closing Remarks

Team Digby attempted to become the low-tech market primary producer. The market strategy

was to implement products that engulfed both ends of the market segment. Daze posed as a

product that led the low-tech market, while Donkey was placed farther back in the market to

produce a product with low variable costs. Due to these products, team Digby dominated the

low-tech market. In round 4 and round 5, the company had 30% of the low-tech market share.

The nearest competitor was team Eerie, and that team had a mere 21% of the market share. In

the final round team Digby profited over $20,000,000 due to this market strategy. The company

decreased in profits from round 2 to round 3, and this was due to the increased competition in the

market segment. Round 3 was the only round that team Digby had to take on an emergency

loan, but round 3 was also the start of a steady increase in profits generated from the products.

Overall, the market strategy worked very well for team Digby. One thing that could have

possibly increased the company’s market share in the low-tech segment would have been to

implement a product that sold in the middle of the market. This would have provided a product

to bridge the gap between the other products. The company definitely succeeded in reaching the

goal of low-tech market dominator.

Profit Trend Low-tech Market Share


$25,000,000.00 35%
30%
$20,000,000.00
25%

$15,000,000.00 20%
15%
$10,000,000.00 10%
5%
$5,000,000.00
0%
1 2 3 4 5 6 7 8
$- und und und und und und und und
0 1 2 3 4 5 6 7 8 Ro Ro Ro Ro Ro Ro Ro Ro
und und und und und und und und und
Ro Ro Ro Ro Ro Ro Ro Ro Ro
Daze Donkey

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